Mr. Spiropoulos: CoreStates Capital Advisors is a SEC-registered investment advisor. We were established in January of 2006. Our investment philosophy is geared towards a strategic & tactical strategy. We do not like style boxes at the moment. We believe that we're in a powerful secular bear market and we're probably only halfway through this. That's pretty much in line with what history books indicate typically happened in past secular bears.
As a result of that belief, we have a focus on alternate investments and tactical strategies that we believe will help keep our clients waterproof; regardless of the market environment. The S&P has had negative returns for the last decade and bonds beat it dandily Unfortunately we could see another four, five, six, or seven years of more volatile and undesirable types of returns from long-only strategies.
TWST: Would you tell us a bit more about the actual investment process and how you come to deal with the volatility in the market?
Mr. Spiropoulos: When an individual approaches us, we go through the typical due diligence analysis; identify the potential investor's ability to tolerate risk, inventory their resources, identify what their need is in terms of return. Then from there we try to build a platform that's going to get the job done and typically that will involve multiple strategies. We happen to believe that the four-cylinder investment engine (stocks, bonds, cash and real estate) is no longer adequate. From 1982 when the last great bull market began, the prime rate was at 20.5%, gold was at 880, and the Dow was at 580. It didn't take a whole lot of magic to create tremendous wealth. Stocks, bonds, cash, and real estate produced powerful returns for almost 20 years.
We think the current environment is going to require an eight-cylinder super financial engine that includes not only stocks, bonds, cash, real estate, but gold & precious metals; currencies, which is the largest market on earth. It would also include the energy complex, which we view as a box all by itself; and managed futures & commodities. Basically anything you eat, smoke, or drink goes in the managed futures space. We think that in each one of those categories, we have to have talented sub-advisors that adhere to a long-short strategy. We think that's the only way that we're going to get Alpha and that's the only way we're going to get reasonable returns going forward. That was the only way to get returns that were positive in the last five years and nothing is going to change short term in our view. Take the currency market for example, it's the largest market on the globe; 2.7 trillion a day trade, but there's only about 300 billion professionally managed. We have that strategy & discipline here in our Delta Fund. We will only commit to G10 currencies and they're traded on a long-short basis. Like any strategy if discipline is used, that enhances the potential to generate extremely attractive returns. Currencies only have 4% correlation to equities, so they rarely move in tandem. When the equity market was severely challenged in 2008 through the first quarter 2009, our currency campaign produced positive results.
Each one of our core strategies focuses on one of the various cylinders or markets that are represented in our eight-cylinder mega financial engine. We like to use a long-short strategy in every market. On the equity side, we prefer the same thing. We will use selected long-only strategies that have good numbers with less drawdown than the broad market and we don't restrain the sub-advisor from being able to use generous amounts of cash during difficult times. We also prefer wherever possible to use a hedged approach where you have a long-short campaign going on.
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